Thomas Lee of Fundstrat Global released the highlights of a Bitcoin mining whitepaper published by FundstratQuant. He highlights his reasons believing Bitcoin would hit $36000 by the end of the year 2019.
The paper details that Bitcoin mining economics lead and explain the price for Bitcoin. The primary argument of the paper is that the multiple of the price and cost required for miners to break even, referred to as the metric P/BE, has “proven a reliable long-term support level” and that the projected trajectory of the growth of mining infrastructure should underpin the appreciation of the price of Bitcoin.
The paper mentions that the mining economy is expected to grow over the next several years, and project a BTC price roughly equivalent to $36000 based on the historical average of 1.8x for the P/BE multiple.
Even as the rate of electricity cost escalation reduces, the network becomes more efficient with newer rigs coming to the market, which offer a higher hash power per watt of electricity consumes. The risk to the thesis lies within this, as a ‘material shift’ in the trajectory of hash power could change the P/BE support price.
As mining is becoming increasingly concentrated in large-scale operations, smaller miners are needed to join these so-called mining “pools” to stay competitive.
Mad Miner, a crypto miner tweeted:
“will be interesting to see if we get there as the increase in difficulty is averaging 7% every 2 wks… Over the next 20 wks that means profit per rig will drop by 70%. We may be approaching a tiping point for smaller miners.”
Sciclo, another Twitter user commented:
“That’s way of of my prediction witch was $ 231,000 in 2 to 3 years, 6 months ago. But that was an holistic calcultion and not a miner economics approach. #Bitcoin we ‘r talking! @rogerkver On the hypothesis of #investors taking a bigger share in #crypto for portfolio insurance.”
A market enthusiast commented:
“I think the assumptions do not include dramatic improvements like lightning network, as such the conclusions are light, likely by substantial amounts.”
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